Investor’s claim said an investment that tracked hedge funds was unsuitable for her risk profile

An arbitration panel ordered the U.S. securities unit of BNP Paribas to pay an investor couple almost $17 million in compensation for hedge-fund investment losses.

Margaret Eringer, a British citizen living in Malta and London, and her American husband James, approached BNP’s New York derivative desk in 2007, asking the French bank to invest about $14.3 million of Ms. Eringer’s wealth. BNP put the money into an option product that tracked the performance of illiquid and highly leveraged hedge funds, including a about $3 million...